BY CHARLES ABUEDE
With the ongoing unrest in Eastern Europe plus the massive volatility witnessed within the first three months of 2022, David Jones, chief analyst at Capital.com, has predicted that the currency market may see a high momentum in cryptocurrency which will propel crypto traders to stay focused on trading the digital assets in the market.
In a report on activities of the first quarter of 2022 Jones offered some key insights into the behaviour of global retail traders during a period of exceptional upheavals such as the end of the Covid-19 pandemic, supply chain shocks, inflationary pressures and bubble fears which came together at the beginning of the year to create an incendiary atmosphere.
“Crypto traders may be driven by momentum more than any other group. They may tend to be herd creatures and many do not sell short due to their personal beliefs. The slide of BTC through November to January would explain widespread disinterest in cryptocurrencies among retail traders,” he said.
The insight released in a proprietary report — Pulse — which captures global trading patterns across 6,000 instruments for the first quarter of 2022 across many different markets: stocks and shares, exchange-traded funds, currencies, commodities, indices and cryptocurrencies, showed that popularity in crypto, by contrast, has declined as a result of decreased investor participation through the quarter, after starting the year on a high in January. Traders of digital assets on Capital.com dropped 16 percent in February and a further 10 percent in March.
The report further revealed that on a quarter-on-quarter analysis, crypto turnover jumped 93 percent during the January-March period, but that was thanks to a few outlying single-day volume spikes in January and not representative, while the number of traders in digital assets declined three percent last quarter from the prior period, while the number of transactions decreased almost seven percent.
However, the simplest signal of overall market mood came from a sentiment indicator based on the relative proportion of long and short positions. The metric showed that long positions declined last quarter to 71 percent of total globally, the lowest level at least since mid-2020.
A brief analysis of the trades carried out in the period saw that Bitcoin (BTC/USD) dominated trading volumes, recording more than five times the turnover of its closest rival ether (ETH/USD) – even though the number of traders in both coins was very similar. Bitcoin and ether against the Australian dollar (BTC/AUD and ETH/AUD) ranked third and fourth respectively on the trading volume chart.
Captivatingly, the ETH/USD pair, according to Capital.com, attracted the biggest number of traders in the three months through March, claiming that spot for the first time – by wrestling it from dogecoin (DOGE/USD) which had held it through the whole of 2021. Other actively traded virtual coins included Shiba (SHIB/USD), Cardano (ADA/USD) and ripple (XRP/USD).
Among the big crypto players, traders were most bullish on vechain, dogecoin and Shiba, with long-to-short position balance in March of 87 percent, 86 percent and 85 percent, respectively. They were least upbeat on bitcoin, with the position ratio at 64 percent in favour of longs. Ethereum was at 67 percent and litecoin at 75 percent.
Also, Jones believes that the United States dollar may see a lot of focus in 2022 as investors see it as a safer haven in times of geopolitical uncertainties while stressing that traders in the dollar-rouble currency pair increased by 261 percent on the day of the invasion and sentiment towards that exchange rate went up by 21 percent during the first three months of 2022 and as such, the EUR/USD was the only foreign-exchange pair with a significant increase in traders throughout the first quarter.
“I think the rest of 2022 may see a lot of focus on the US dollar. It is viewed as something of a safe haven in times of geopolitical uncertainty, and it ended March up a couple of percent for the year to date. It had been rising anyway on the widely telegraphed higher than expected inflation numbers and as the first quarter ended it certainly had a tailwind going into April.
“It has been the case for the last 18 months that retail investors have been happy to be a buyer of the US dollar on dips, and so far at least that has remained the case this year,” said chief analyst Jones.
